Presidential hopefuls spar over economy as Trump turns screws on Iran

[May 08, 2017]  By Bozorgmehr Sharafedin

LONDON (Reuters) - President Hassan Rouhani's trip to the coal mine in northern Iran was all going to plan, until the crowd massed in front of his car chanting "it's a day of mourning for workers".

Seconds later, shaky footage of Sunday's protest showed a man jumping onto the bonnet and stamping hard on the metalwork, a rare direct confrontation against the background of a highly-charged election race that keeps returning to one subject - Iran's stuttering economy.

Rouhani was officially there to visit families bereaved by an explosion at Zemestanyurt mine last week. But the protest slogans broadened out into other areas - poor safety standards, late payments, poor insurance coverage and seasonal unemployment.

Media outlets supporting Rouhani's conservative rivals, who have repeatedly accused him of failing to deliver the jobs and growth he said would follow his landmark nuclear deal, posted the film far and wide on social media. "The devastated miners cannot live with Rouhani’s hollow promises," said Tasnim agency.

Other agencies, including ISNA, suggested the crowd in Golestan province had been infiltrated by Rouhani's enemies. The slogans were striking similar to ones shouted by protesters who disrupted the president's May 1 campaign speech at the mausoleum of the late Ayatollah Ruhollah Khomeini.

Staged or not, the slogans echoed the battle-cries of the broader election campaign, where Rouhani's rivals have focused on his handling of an economy threatened by high unemployment, low oil prices, slow growth outside the crude sector and a new, unpredictable foe in U.S. President Donald Trump.

"All the positive results of the nuclear deal and lifting of sanctions have been overshadowed by the low prices of oil," economist and Rouhani supporter Saeed Laylaz told Reuters in a phone interview from Tehran.

The 2015 deal that Iran signed with world powers to limit its nuclear work in exchange for lifted sanctions - a pact that Rouhani has held up as his signature achievement - provided a short-term economic boost.

Inflation dropped to single digits under his watch and real GDP grew by as much as 7.4 percent. But the economy, largely reliant on oil exports, took a hit when prices plunged from $104 to $44 per barrel.

OIL, UNEMPLOYMENT

Rouhani's rivals say the president bet too strongly on rapprochement with the West, waited in vain for foreign investment, and did too little at home to improve national production.

Presidential hopefuls, among them influential cleric Ebrahim Raisi and Tehran Mayor Mohammad Baqer Qalibaf, have jumped on the unemployment rate which rose to 12.4 percent last year, up 1.4 percent from the previous year.

Despite creating 600,000 jobs last year, the government only managed to absorb less than half the new entrants into the labor market.

"Iran's large and youthful population is both an opportunity and a challenge for the Islamic Republic," Pratibha Thaker, The Economist Intelligence Unit's editorial director for Middle East and Africa told Reuters.

"With around 35 percent of its plus population aged 15-29, Iran has one of the world's highest recorded ratios of a group seeking both marriage and employment opportunities," he added.

Rouhani said last week that the way to tackle unemployment was to attract $140 billion in foreign investment to modernize oil and gas, transportation and telecommunication sectors after decades of international isolation.

Iran's President Hassan Rouhani speaks as he visits Azadshahr mine explosion site in Azadshahr, Golestan Province, Iran May 7, 2017. President.ir/Handout via REUTERS

But foreign investors are still cautious about trading with or investing in Iran, waiting to see if Trump will tear apart the nuclear deal as he promised during his election campaign.

The International Monetary Fund (IMF) this year applauded Iran's "impressive recovery", but also noted that anxiety over the future of the nuclear deal had created "renewed uncertainty" that threatened the "anticipated recovery".

Washington has put Iran "on notice" after Tehran's ballistic missile tests, imposed new sanctions, and it is launching a review of the nuclear agreement.

"It is unlikely Trump will unilaterally withdraw from the 2015 nuclear agreement..." said Ryan Turner, Middle East analyst at Protection Group International.

"However, his administration could seriously undermine the nuclear deal by pressuring Western companies not to do business in Iran... or creating uncertainty around sanctions waivers."

TRUMP TREMORS

The uncertainty has caused long delays in contracts that Iran seeks with international firms to develop its oil and gas fields.

Conservative challengers Raisi and Qalibaf have promised to create five to six millions job in their first term if elected.

They have both said they will create an "inward-looking" economy, focused on national production and narrowing the gap between rich and poor.

Raisi said he will triple the monthly cash handouts to the lower class. Qalibaf has promised to increase the national income 2.5 times in four years.

Other political figures, from both the conservative and pro-Rouhani camps, have questioned their proposals.

"Those who say they would create five million jobs are deceiving people," said Eshaq Jahangiri, first vice president who is also running in the election.

Parliament's conservative speaker Ali Larijani, has criticized the candidates of promising the impossible and said there said there was no money to increase the government's cash handouts.

"The candidates ... all want to create jobs, increase production and economic growth" said the pro-Rouhani analyst Saeed Laylaz. "They are repeating what Rouhani has said, only with bigger figures."

(Editing by Andrew Heavens)

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